NEW YORK Global equity markets fell sharply on Monday while gold and bonds rose after a 7-percent slide in Chinese shares, sparked by weak economic data, rekindled worries over global growth on the first day of trading in 2016.

Rising tensions in the Middle East also increased demand for safe-haven assets. Crude prices rose above $38 a barrel at one point as some speculated a breakdown in diplomatic ties between Saudi Arabia and Iran could result in oil supply restrictions.

But crude prices then retreated on worries that the weak Chinese data could portend slower global growth, which also hurt Wall Street and sent key indexes down more than 2 percent.

On Wall Street, the Dow Jones industrial average fell 423.4 points, or 2.43 percent, to 17,001.63. The S&P 500 slid 47.27 points, or 2.31 percent, to 1,996.67 and the Nasdaq Composite lost 140.71 points, or 2.81 percent, to 4,866.70.

China's yuan currency hit its lowest in more than four years after the central bank lowered its guidance rate and factory activity contracted for a 10th straight month in December, at a sharper pace than in November.

The selloff in China triggered a circuit-breaker that suspended equities trading nationwide for the first time and put at risk months of regulatory work to restore market stability.

In the United States, the iShares China large-cap ETF fell 3.5 percent, its biggest single-day slide since a 4.5-percent drop in September.

Investors are warranted to worry about global growth as the factory numbers may not fully indicate how quickly China has been slowing down, said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

"The China 7-percent drop last night and the close of the market, along with Saudi Arabia, are causing investors to rethink to their growth estimates and the geopolitical risk that’s really out there," Mendelsohn said.

OIL RETREATS

Oil prices slid in volatile trading, following the stock market lower on fears of China's slowing economy. Earlier, crude jumped 4 percent in early trade on Middle East tensions.

The Saudi-Iranian standoff raised fears over the security of oil supplies from the Middle East, estimated to hold about half of the world's proven oil reserves.

Saudi Arabia, the world's biggest oil exporter, cut diplomatic ties with Iran on Sunday in response to the storming of its embassy in Tehran, following Riyadh's execution of a prominent Shi'ite cleric on Saturday.

Brent fell 0.7 percent to $37.02 a barrel and U.S. West Texas Intermediate (WTI) futures fell 1.3 percent to $36.56 a barrel.

The dollar pared earlier gains against a basket of key currencies as a private gauge on U.S. manufacturing activity unexpectedly fell in December to its weakest since June 2009, stoking worries about slowing domestic economic growth.

The Institute for Supply Management said its index of national factory activity fell to 48.2 from 48.6 in November, which was below the median forecast of 49 of economists polled by Reuters. A reading below 50 signals contraction in domestic manufacturing activity.

The dollar index, which measures the greenback against a group of six currencies, was last up 0.31 percent at 98.938.

The euro fell 0.34 percent to $1.0815, while against the yen, the dollar fell 0.83 percent to 119.30.